Drop Shipped Goods Failed to Qualify for Administrative Expense Priority in Bankruptcy [Delaware Business Court Insider]

Barry Klayman and Mark Felger, members of the Cozen O’Connor Bankruptcy, Insolvency, & Restructuring Practice Group, discuss in the Delaware Business Court Insider a recent case in which the Bankruptcy Court for the District of Delaware held that goods delivered directly to the debtor's customers within 20 days prior to the bankruptcy petition, even though at the debtor's direction and utilizing the debtor's account with the shipper, will not qualify for administrative priority treatment under section 503(b)(9) of the Bankruptcy Code because the debtor never had physical possession of the goods. The decision has significance for creditors that sell goods to debtors right before the debtors file for bankruptcy. 

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Mark E. Felger

Co-Chair, Bankruptcy, Insolvency & Restructuring

mfelger@cozen.com

(302) 295-2087

Barry M. Klayman

Member

bklayman@cozen.com

(302) 295-2035


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